13 SaaS Adoption Metrics That Can Help You Measure Customer Engagement
For a SaaS business, success isn’t just about getting customers to buy your product. It’s also about getting those customers to actually use it.
That’s why, if you’re running a SaaS company, customer acquisition is just the beginning of every customer’s journey. The real challenge is in making sure they stick around and getting them to experience the value of your product.
In this article, we are going to focus on the latter part—getting your customers to experience what your SaaS product has to offer. Specifically, we are going to talk about SaaS adoption metrics.
What Is SaaS Product Adoption?
SaaS product adoption, or user adoption, refers to the process of customers using and engaging with your SaaS product. It is the measure of how many customers actually use your product, and how deeply they integrate it into their workflows and processes.
Therefore, SaaS adoption metrics are key performance indicators (KPIs) of how much your customers are adopting your SaaS solution.
They tell you how successful you are in getting customers to experience the value of your product, and can predict how likely they are to stick around in the long run.
Why Do You Need To Track SaaS Adoption Metrics?
Tracking SaaS adoption metrics allows you to measure and monitor the overall usage of your SaaS product. And that opens up a lot of doors to a lot of benefits.
Here are a few of these benefits:
It Helps You Predict Customer Retention and Churn
By tracking SaaS adoption metrics, you can get a better understanding of how engaged your customers are with your product. The extent to which customers are using your SaaS product may indicate how much value and benefit they get from it.
In turn, the value that customers get from your SaaS product may be able to predict how likely they are to stick with your product.
If they’re using it more deeply and consistently, that’s a good sign that they’ll stick around for the long term. On the other hand, if they’re not engaging with your product at all or rarely use it, then there’s a high chance that they’ll churn in the near future.
It Uncovers Potential Issues With Your SaaS Product
Product adoption metrics can also help you uncover any potential issues with your SaaS solution.
Is it too hard to use? Do customers find it confusing? Are certain features under-utilized?
By tracking SaaS adoption metrics, you can answer these questions and identify any areas that need improvement.
It Gives You a Deeper Understanding of Your Customers
User adoption metrics can also give you valuable insights into your customers’ behaviors and preferences. This information can be used to tailor the product experience for each customer and ensure they get maximum value from it.
It Helps You Identify Upselling and Cross-Selling Opportunities
Last but not least, SaaS adoption metrics can also help you identify upselling and cross-selling opportunities.
By tracking how much customers are using your product, you can easily spot areas where they may need additional features or even add-on SaaS products. And that can give you an opportunity to suggest the perfect add-on or plan for them.
SaaS Adoption Metrics You Need To Track
There are quite a number of SaaS metrics that can indicate different aspects about user adoption of your SaaS solution.
Let’s talk about some of them:
1) Daily Active Users (DAU) and Monthly Active Users (MAU)
Your daily active users (DAU) and monthly active users (MAU) are the most basic SaaS adoption metrics. They tell you how many users use your product on a daily and monthly basis, respectively.
The thing about these metrics is that they don’t tell you much about how engaged your customers are with the product. In fact, some even consider them vanity metrics (which are metrics that may look good at first glance but don’t really provide any helpful insight).
However, they do give you an idea of how many people actively use your SaaS product.
2) DAU/MAU Ratio
Although DAU and MAU on their own may not be very useful, you can use them to compute a more insightful metric: the DAU/MAU ratio.
This metric tells you how many of your monthly active users are actually using the product on a daily basis. It’s also known as “stickiness”, and it gives you an indication of how deeply customers are engaged with your product.
To calculate it, simply divide your DAU by your MAU.
For example, if you have 1,000 DAU and 2,000 MAU then your DAU/MAU ratio would be 50%. That means out of a total of 2,000 active users, only half actually use your SaaS product on a daily basis.
3) Customer Churn Rate
The customer churn rate, also known as the customer attrition rate, is a metric that measures how many users of your SaaS product are canceling their subscriptions.
This can be determined by calculating the percentage of customers who have stopped using your product after a certain period of time.
For example, let’s say you have 500 active customers. If 20 of those customers cancel their subscriptions after three months, then your customer churn rate would be 4%.
Churn can be caused by a lot of factors. And user adoption could be one of them. To get the more insights, other adoption metrics can help you pinpoint which customers are at risk of churn so that you can intervene and offer the necessary support.
When it comes to minimizing customer churn, it’s important to identify at-risk customers early on. This way, you can proactively provide extra resources and assistance to ensure they get the most value out of your product.
4) Activation Rate
To understand this metric, we first need to discuss what the word “activation” means in the context of SaaS product adoption.
Activation is the point at which a user has completed some action that indicates they are getting value from your product.
This is usually defined as the first time a user completes a certain task or reaches a certain milestone.
And that activation event can be different for each SaaS product. For example, activation for a project management app could be when a user creates their first task. Or for a file-sharing platform, it could be when someone sends their first file.
The activation rate is simply the percentage of users who reach this activation milestone within some defined period of time. It can often help you identify any areas of your product that may need improvement in order to increase user engagement and retention.
To calculate your activation rate, divide the total number of activated users by the total number of registered users.
For example, if 1,000 people register to use your SaaS product but only 600 actually reach activation, then your activation rate would be 60%. That means 40% of the people who registered for your product never got any value out of it and churned before reaching activation.
By tracking this metric, you can see how successful you are at onboarding new users and getting them hooked on your product.
5) Time To Value (TTV)
While measuring how many of your customers experience the value of your SaaS product, it’s also more important how quickly they get to that point.
That’s where Time To Value (TTV) comes in.
TTV is a metric that tells you how long it takes users to get value out of your product, whether it’s days, hours, or even minutes (if your SaaS product is that good).
What’s great about this metric is that you can measure how quickly your customers experience different levels of value.
Here’s how you can measure TTV at different stages:
A short time to basic value indicates that your onboarding process or free trial is effective in helping new users quickly get up-to-speed and understand the value they can receive from your product.
Time To Exceed Value: Sometimes, even if a user is already experiencing the value of your SaaS product, they may discover more features that they didn’t expect would give them more value.
Time to exceed value tells you how long it takes for users to reach this point.
This metric will indicate how well your customers are adopting your more advanced features. This could be an indication of your performance on different product adoption strategies, such as webinars or your customer success efforts.
Long Time To Value: For B2B SaaS businesses, the ultimate value that your SaaS product can provide to your customers is driving a significant return on investment (ROI) over time.
Therefore, the long time to value metric is simply how long it takes for your customers to experience a positive ROI from using your product.
This can measure the performance of your customer success team and other efforts to help your customers reach their goals using your SaaS product.
6) Feature Adoption Rate
Measuring feature adoption rate helps you understand which of your product’s features are being used by users. This can reveal any areas of your product that need improvement in order to drive engagement and increase customer satisfaction.
To calculate the feature adoption rate, divide the number of unique users who have used a particular feature by the total number of active users.
For example, if you have 1,000 active users and 800 of them have used a specific feature, then the feature adoption rate for that particular feature would be 80%.
You can track and compare these feature adoption rates for each of your SaaS product’s features to see which ones are resonating best with your customers.
You can also track this metric over time to see if your product adoption strategies are working. If you’re not seeing the desired results, then it could be time to re-evaluate and make changes to your product or marketing strategy.
7) Feature Engagement Rate
While the feature adoption rate tells you which of your product’s features are being used, the feature engagement rate will give you a deeper understanding of how engaged users are with that particular feature.
To measure the feature engagement rate, take the number of times a user accesses a specific feature over time.
For example, if a user utilizes a feature 10 times a day, you can record that as 10 engagements per day.
To draw useful insights from this metric, you should compare different feature engagement rates for various features. This will help you to identify which features are the most engaging for your users and determine where improvements can be made if needed.
You can also use this metric to identify trends in feature usage, such as certain days of the year when certain features are more popular than others. This information can be valuable in helping you refine your product development roadmap and prioritize new product features.
8) Time To Adopt
Time to adopt is a metric that simply measures how quickly users take up your product’s features.
This can be used to gain insights into which of your product’s features are easy to use and which ones require additional guidance.
9) Average Session Duration
In the context of SaaS product adoption, a session is defined as the time period in which a user accesses and interacts with your product.
So, average session duration is a metric that measures how long users are engaged in your product and for each feature. This can indicate whether or not your product is being used as intended and can offer valuable insights into where improvements need to be made.
You can also use this data to understand if users are engaging with various features of your product or if they’re simply logging in but not using any features.
To calculate average session duration, take the total duration of sessions and divide it by the number of sessions made over a period of time.
For example, let’s say a customer’s session for one month sums up to a total of 20 hours with 40 log-ins. Your average session duration would be 0.5 hours or 30 minutes.
10) Customer Engagement Score
The customer engagement score is a metric that measures each customer’s overall adoption and experience of your SaaS product.
While it provides a holistic view of user engagement, it can also reveal which customers are the most engaged and therefore likely to benefit the most from your product.
Now, calculating your customer engagement score can be quite tricky. Here are some steps you can take to calculate it:
Identify Key Engagement Events: To start, you’ll need to identify the key activities that indicate meaningful usage of your product. These could be activation events indicating that your user is getting significant value from your SaaS product.
For example, let’s say you have project management software. Your key engagement events could include creating a project, assigning tasks to team members, and completing a project. These are key activities that indicate your users are actively using and benefiting from the product.
Of course, in the real world, you could have more than three key engagement events.
Assign Each Event a Weight Value: Next, give each engagement event a weight value that reflects how much value it carries for your customer.
For instance, the activation event of creating a project could be assigned a weight of 3 points, assigning tasks to team members could be assigned 1 point, and completing projects could be given 10 points.
Multiply Event Frequency and Weight Value: Next, you’ll need to multiply the event frequency (the number of times an event was completed) by its assigned weight value.
For example, if a customer completed four projects over three months, that would be calculated as 4*10 = 40 points.
Add Up All Engagement Scores For Each Event: To finally calculate your overall customer engagement score for a customer, you need to add up all the engagement scores for all your events.
For instance, let’s say a customer completed the following engagement events over a period of time:
5 Projects created
20 Tasks assigned
4 Projects completed
In this case, their Customer Engagement Score would be calculated as (5*3) + (20*1) + (4*10) = 75.
Create A Scale: Finally, create a scale to interpret your customer engagement scores.
For example, you can assign the following scale to your customer engagement score:
Score of 0-25 = Low Engagement
Score of 26-50 = Moderate Engagement
Score of 51-75 = High Engagement
Score of 76+ = Very High Engagement
By tracking the customer engagement score for each customer and comparing it with the scale, you can quickly identify which customers need your attention and help.
11) Customer Health Score
The customer engagement score may be a comprehensive metric to measure how much your customers engage with certain features of your SaaS product. But the customer health score takes it a step further.
The customer health score offers an even more granular view of user engagement and can help you measure the success or failure of your product’s performance. It considers different actions that could contribute or subtract from the customer’s overall “health” or level of satisfaction with your SaaS product.
Calculating your customer health score is almost similar to the process for finding your customer engagement score. But there are few differences.
Identify Actions That Can Affect Customer Satisfaction: Before you calculate the customer health score, you need to identify different user actions that can affect a customer’s overall satisfaction with your product.
Aside from customer engagement events, it could also be interacting with your customer support team, answering a survey, or even not-so-good things like having an unresolved support issue.
Assign Values For Each Action: Like in the customer engagement score computation, you also need to assign values for each action. However, here, we have an action that negatively impacts the customer experience. So we can assign a negative value to it.
For example, completing an activation event could be given 5 points, answering a survey could be assigned 3 points, and having an unresolved support issue could be given -2 points.
Multiply Action Values With Frequencies Of Occurrence: Next, you’ll need to multiply the frequency of occurrence for each action by its assigned value.
For instance, if a customer completed three activation events over a period of time, that would be calculated as 3*5 = 15 points. Similarly, if they had one unresolved support issue during that same period, it would be calculated as 1*(-2) = -2 points.
Add Up All Action Values: To finally calculate your customer health score, you need to add up all the action values for each customer.
For example, let’s say a customer engaged in the following activities over a period of time:
10 Activation events completed
1 Survey answered
2 Unresolved support issues
In this case, their customer health score would be calculated as (10*5) + (1*3) + (2*(-2)) = 49.
Create A Scale For Customer Health Score: Finally, create a scale to interpret your customer health scores.
For example, you can assign the following scale to your customer health score:
Score of less than 0 = Customer at risk of churning
Score of 0 to 30 = Customer has fair health but needs improvement
Score of 30 to 80 = Customer has good health
Score of more than 80 = Customer could be a loyal user or advocate
By tracking the customer health score for each customer and comparing it with the scale, you can quickly identify which customers need urgent attention from your customer support or success team.
This can also help you create custom engagement strategies or product experiences that are tailored to their needs.
12) Customer Lifetime Value (CLV)
The customer lifetime value (CLV) metric is a measurement of the total amount of money a customer will generate for your business over time.
It’s calculated by multiplying the average revenue per user (ARPU) by the average customer lifespan.
For example, if one customer on average generates $500 per year over a customer lifespan of 3 years, their customer lifetime value would be calculated as $500 x 3 = $1,500.
CLV is an important metric to track when it comes to SaaS adoption metrics because it can help you identify which customers are providing the most value to your company and prioritize them accordingly.
13) Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a metric that measures customer satisfaction with your product. It does this by asking customers this question:
“On a scale of 0-10, how likely are you to recommend our SaaS product to a friend or colleague?”
Based on their responses, customers are divided into three groups based on the score they gave:
- Promoters (9 or 10): These are happy customers who are likely to recommend your SaaS product to others.
- Passives (7 or 8): These customers are somewhat satisfied but not enthusiastic about it.
- Detractors (0-6): These are unhappy customers that could hurt your brand through negative reviews.
To calculate your NPS rating, subtract the percentage of detractors from the percentage of promoters.
For example, if 40% of your customers are promoters and 20% are detractors, then your NPS score would be 20.
Your NPS is a great way to measure customer loyalty and advocacy. Higher NPS scores indicate that your customers are more likely to recommend your product and remain loyal for longer. Lower NPS scores, on the other hand, can signal areas of improvement in terms of customer satisfaction.
What’s more, with the right follow-up questions, your NPS survey can also help you identify areas where you need to improve your product so that more customers become promoters.
It’s best to monitor this metric regularly to ensure that your users are happy with the experience they’re getting from your product.
Final Thoughts About SaaS Adoption Metrics
User adoption can make or break a SaaS business. Improving it and making sure that your customers are getting the most value out of your SaaS product can be a tough but very rewarding task.
And the first step to that is measuring the right metrics. With the help of the various KPIs we’ve discussed above, you can get an accurate picture of your SaaS product adoption rate and identify areas for improvement.
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